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Saxo Bank has become a well-established provider of credit to market participants who choose not to get traditional prime brokerage (PB) relationships or are too small for the FXPB banks to take on as clients. The prime-of-prime (PoP) provider space, in which Saxo operates, has also matured since 2015, when the service first became popular.

“There are several different models in the market – they are not all the same. It’s distinctive what each PoP offers,” says Peter Plester, head of FXPB at Saxo Bank.

Immediately after 2015, PoP providers mushroomed in number as prime brokers raised minimum requirements and refocused on larger clients. In the last three years, however, a handful of bigger PoP shops have thrived while others wilted.

These providers offer slightly different flavours of prime to customers and typically target a certain client segment for services. Plester says Saxo’s prime offering attracts larger clients with up to $20 million in assets, including proprietary trading firms, brokerages, family offices, hedge funds and money managers.

Saxo connects these clients to about two-dozen bank and non-bank liquidity providers, as well as nine ECNs, and it manages liquidity for its clients. Plester emphasises that Saxo does not trade against its clients or act as a liquidity provider in client liquidity pools.

We run a true PoP model, so we are a proper credit intermediary. We don’t put our own price feed in, so we are not in conflict with the client

Peter Plester, Saxo Bank

“We run a true PoP model, so we are a proper credit intermediary. We don’t put our own price feed in, so we are not in conflict with the client. We are looking for a win-win, so the client wins and we win by them paying us transparent commissions,” says Plester.

Saxo Markets was voted Best Prime-of-Prime House at the 2018 FX Week Best Banks Awards.

The bank has also introduced a dynamic credit-allocation model across its three matching engines in London, New York and Tokyo, along with a full-amount feed for clients trading order sizes of between $5 million and $50 million.

The full-amount feed is aimed at minimising the market impact of trades as it allows clients to request-for-quote for a full-amount order on a bilateral basis. The bank protects liquidity providers by restricting clients from putting in additional trades after a full-amount request until at least five seconds have passed.

Saxo also offers credit across several asset classes in 37,000 financial instruments. The Danish institution’s strong capital position and European banking licence also boosts its PoP allure, says Plester.

“We have been in the liquidity management space for over 25 years, so we have a lot of experience in managing liquidity for ourselves and our clients. We also have a lot of deep and long-lasting relationships with liquidity providers, prime brokers, exchanges, etc, so that is a big advantage for clients who use us,” he adds.